Subsidize it and they will come

In a talk on Friday at Yale, Mr. Cameron said environment bonds (or climate bonds, as he has called them on other occasions) would be a straightforward way for governments to raise money to develop clean technology and build low-carbon economies.

Governments would collect money from investors who would benefit from guaranteed – but modest – rates of return. In the meantime, governments would invest in green infrastructure.

Because the bonds would offer secure returns, they should appeal to citizens and investors disillusioned by the implosion of the banking sector and worried by the grim economic outlook, according to Mr. Cameron. Additionally, the bonds could tap a vein of renewed idealism among investors who are seeking to use financial system for good causes.

I guess we can’t depend on capital markets to fund worthy projects so government must come to the rescue. In the end, it is the taxpayer who pays.